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May 18, 2024
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Retailers and Wholesalers Overtook 3PL Providers as Top Drivers of Big-Box Warehouse Demand in 2023


This report was provided by real estate services firm CBRE

General retailers and wholesalers leased the most big-box warehouse space in Puget Sound in 2023, accounting for nearly 64% of all transactions in the region, according to a new report from CBRE.

Retailers and wholesalers in Puget Sound dethroned last year’s top occupier category, third-party logistics (3PL) providers. Automobiles, tires and parts also saw an increase in share of leasing activity (7.6%), up from 6.7% in 2023.

Puget Sound was one of nine big-box markets to increase lease transactions year-over-year. In 2023, Puget Sound had 8.2 msf leased, up 100k sf from 2022.

“Retailers and wholesalers want to be closer to their point of sale as they increase supply chain efficiencies,” said Andrew Hitchcock, executive vice president at CBRE. “First-year, Class A taking rents in Puget Sound are among the 10 highest of the top markets, signaling strong market fundamentals even with some softening in the market.”

Direct vacancy increased to 5.7% in 2023, up from 2.9% the year prior due to vacancy in smaller buildings and increased construction. However, the vacancy for industrial buildings over 750k sf was 0.7%, the fourth lowest of any market in that size range. There was 6.7 msf under construction at year-end, with 47.7% of it preleased.

National Trends

General retailers and wholesalers leased the most big-box warehouse space in North America in 2023, accounting for 36% of all transactions. Third-party logistics had the second largest share of leasing in 2023 (34.9%), followed by food and beverage and e-commerce.

Of the leasing activity that took place, demand was driven primarily by a desire to boost supply chain resilience, increase access to growing population centers, modernize space to accommodate increased automation and support continued e-commerce growth.

CBRE analyzed “big-box” warehouses of 200k sf and larger for of their critical nature to extensive national and international product distribution. Encompassing the United States, Mexico and Canada, the big-box report found that industrial facilities had higher taking rents than in years past. Rent growth remained robust at 15.9%, but down from 25.1% in 2022.

“There was naturally going to be a period of cooling in big-box leasing, which had reached unsustainable levels in recent years, due to e-commerce demand and companies electing to warehouse to more inventory,” said John Morris, CBRE’s President of Americas Industrial & Logistics. “This cooling represents a move toward stabilization, and we expect a modest increase in lease transaction volume this year as the market settles.”

CBRE forecasts a 5% increase in big-box leasing volume in 2024 as current market conditions are favorable to tenants. This indicates a potential rebound in demand, as the market strives to catch up with the robust deliveries of newly constructed industrial spaces.

Industrial construction activity peaked in 2023, with a record 413 msf delivered to the market, causing a doubling of the vacancy rate to 6.6%. However, construction in progress dropped to 208.4 msf by year end, half of the previous year's total.

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